(Alliance News) - Bill Ackman's Pershing Square Holdings Ltd on Friday said it swung to an interim loss, citing uncertainty around monetary policy, rising inflation and geopolitical events.
Pretax loss in six months to June 30 stood at USD3.04 billion compared to a profit of USD718.7 million a year prior, the investment company focused on North American companies said.
The firm posted a loss per share of USD14.99, turning from a profit of USD3.30.
Pershing reported a USD4.11 billion net loss on financial assets and liabilities, swinging sharply from a net gain of USD760.7 million.
Total assets dropped to USD11.86 billion at June 30 from USD15.81 billion at December 31, 2021. Compared to a year ago, total assets fell from USD12.41 billion.
"The first half of 2022 was a challenging time for PSH, for companies and for the financial markets in general, driven in large part by rising inflation, uncertainty around monetary policy, and geopolitical events. PSH's investment strategy is long-term in nature. The investment manager believes that if PSH invests in high quality businesses with limited downside and which generate recurring and predictable cashflows, it will be able to withstand periods of volatility," the Guernsey-based company explained.
Pershing's net asset value per share decline of 26% in the half marked an underperformance of the S&P 500, which fell by 20% over the same period. "The decline in PSH's equity portfolio was partially offset by the investment manager's strategy to hedge against inflation and rising interest rates," it noted.
Universal Music Group NV detracted by 6.9%, the worst performer in its portfolio over the half. However, Pershing remains optimistic about the music group's future performance. "We believe that UMG's decades-long runway for growth remains underappreciated by investors. With increasing streaming penetration combined with the development of new services, platforms, and business models, UMG can grow revenues at an annual rate of 10% or so for more than a decade," it said.
On portfolio changes during the period, it highlighted its Netflix Inc stake sale.
"When Netflix reported its Q1 earnings in April, information came to light which caused the investment manager to lose confidence in its ability to predict the company’s future prospects with a sufficient degree of certainty. Given the potentially wide dispersion of outcomes for the business, it felt Netflix no longer met its requirements to be a core holding, and exited the position," it said, adding it was "very disappointing" to make a substantial loss on the investment but said the move "ultimately capped losses".
Regarding its investment in pizza restaurant chain Domino's Pizza Inc, it said: "As of August 16, 2022, we have also fully sold our position in Domino's, and the investment manager intends to use the funds raised for alternative investment opportunities," the firm added. Domino's detracted 2.7% from portfolio performance in the first half of 2022.
Pershing Square shares were flat at 2,740.00 pence each in London on Monday morning.
By Tom Budszus; tombudszus@alliancenews.com
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Pershing Square Holdings (PSH)